Suspect Sugar Transactions

The ICC Financial Investigation Bureau (FIB) has recently identified a spate of suspect financial instruments relating to shipments of sugar.

The documents, each worth millions of dollars, purported to be for shipments of a high-grade sugar, a commodity in demand today. Through analysis of the parties and documentation, as well as enquiries in the market, FIB was able to quickly ascertain that these documents were suspicious and, accordingly, advised members to exercise caution. FIB Manager Karen O’Neill commented: “These documents seem to be from potential fraudsters who appear to be attempting to exploit the high demand for a particular commodity, possibly to swindle an advance fee from an unwitting buyer tempted by a low price. Thorough checking of each document exposed a number of ‘red flag’ terms that signal the illegitimacy of the transaction to which it purportedly relates.” The sugar specified in these shipments has all been of a high grade. Enquiries in the market suggested that due to a poor harvest in the country of origin, prices for this crop are at a premium, whilst the price suggested on the contracts was significantly below market prices. This is a typical ploy by fraudsters to entice the buyer victim at a time when he cannot source the cargo genuinely at the price he expected. Furthermore, checks carried out by FIB showed that the purported destination port lacked sufficient draft to accept a vessel carrying the quantity depicted in the documentation.

Further due diligence checks revealed various red flag terms indicative of a fraudulent document. ICC UCP had been misquoted, signatures did not correspond to the names on the documents, e-mail addresses were shown incorrectly and checks against various telephone and fax numbers listed found them to be unobtainable. Ms O’Neill continued: “In the above cases, the buyers appeared to be inexperienced intermediaries who would not have had an experienced track record. It is possible that they had been tempted by ‘too good to be true’ prices. This, coupled with the error-strewn documentation, prompts us to warn all genuine traders and financial institutions to be wary when encountering similar transactions. We advise the thorough checking of all parties and documentation before any commitment is made.” As part of its services to members, FIB is able to verify documentation such as Letters of Credit and bank guarantees. It also has an extensive database, built up over 28 years, against which all entities can be checked as part of loss prevention procedures.